Analytical Study On Indian Budget

Chapter-1
1.1 Introduction
The term ‘Budget’ appears to have been derived from the French word ‘baguette’
which means ‘little bag’ , or a container of documents and accounts. A budget is an
accounting plan. It is a formal plan of action expressed in monetary terms. It could be
seen as a statement of expected income and expenses under certain anticipated operating
conditions. It is a quantified plan for future activities – quantitative blue print for action.
A Budget is an important concept in microeconomics. Budget is a statement of the
financial positions of an administration for a definite period of time based on estimates of
expenditure during the period and proposals for financing them. It is a plan for the
coordination of resources and expenditure.
The first general budget of India was presented by the India’s first finance minister Sir
R.K. Shanmugham Chetty on November 26, 1947. Since then 28 union finance ministers
have been presented the budget every year. Initially, much attention was given to the
agricultural sector but as later on, the focus shifted to the other sectors including the
industrial, financial and other sectors.
A government budget is a document plan of public revenue and expenditure that is
often passed by the legislature, approved by the chief executive or president and
presented by the Finance Minister to the nation. The budget is also known as the Annual
Financial Statement of the country. These documents estimate the anticipated government
revenues and government expenditures for ensuing (current financial year). Government
budgets are of three types: balanced budget (when the government revenue as expenditure
are equal), surplus budget (when anticipated revenues exceed expenditure), deficit budget
(when anticipated budget is greater than revenues).
The Union Budget of India, also referred to as the Annual Financial Statement in
Article 112 of the Constitution of India, It is the annual budget of the Republic of India.
The Government presents it on the first day of February so that it could be materialised
before the beginning of new financial year in April. Until 2016 it was presented on the
last working day of February by the Finance Minister in Parliament. The budget division
of the department of economic affairs (DEA) in the finance ministry is the nodal body
responsible for producing the budget.[2] It is presented by means of the Finance bill and
the Appropriation bill has to be passed by Lok Sabha before it can come into effect on 1
April, the start of India's financial year.Since 1947, there have been a total of 73 annual
budgets, 14 interim budgets and four special budgets, or mini-budgets.

1.2 Review of Literature

1. Mathews, (1958) in his study, “Pattern of Indian Public Expenditure”, presents
the pattern of Public expenditure from 1937 to 1956 and considered only the large ite
ms of expenditure significant in the process of economic development is one of the
purposes of examine the extent to which the changes in the pattern of expenditure are
the result of deliberate policy of whether they have been the outcome of the
government. According to him, the expenditure – Pattern through emerged at the end
of the first five-year plan was mostly the result of deliberate policies of the
government.
2. Mukerjee,(1965) in his study, “Level of Economic Activity and Public Expenditurein
India”, has presented a statistical and quantitative study. The study is an exercise in
the reconstruction of historical statistical and developmental of the first half of the 20 th
century, moreover, he has not made any effort to go behind his statistical results to
establish a theoretical link between aggregate economic activity and the activity of
the public sector.

3. Madalgi, (1966) in the study, “The Trends and growth in State Governments
Expenditure in India since Five Year plans”. The study covered from 1951 to 1966,
witnessed the completion of the first three five year plan.” He has analyzed only the
Revenue Expenditure and has not considered Capital Expenditure.

4. Purshottam Dass and Thakura Das, (1966) Research Wing studies present, “A Factual
study of public finance of the Government of India from 1950-51 to 1964-65”.
Besides period of 14 years, this work endeavours of analyse the important issues and
focus attention on them in such a manner that further exploration and that critical
examination may be possible.

5. Panchmukhi, (1966) in his study, “Measurement of the Effects of Public

Expenditure”, presents the applied theory of public expenditure. He brings out the
importance of cost-benefit analysis in the process of public expenditure. His study
represents a step towards clarifying the economic aspects of the effects of expenditure
on education and health, the knowledge of which is essential for making rational
decision in these fields.

6. Gupta, (1971) in his study “who benefits from Central Government Expenditure”, has
examined and evaluated the extent of the impact of the Central Government
expenditure on economic in equality and poverty and on the pattern of consumption in
a society for generation of employment opportunities.

7. Reddy, K.N., (1972) in his study, has analyzed a secular and time pattern of the
growth of public expenditure in India. He has taken time period from 1872 to 1968. In
an effort to establish a theoretical link between the growth of public expenditure and
National Income of the country Reddy has examined the applicability of Wagner’s
hypothesis in India. Reddy concludes that the study conducted by Peacock and
Wiseman for great Britain also holds good in case of India. The study provides
important guidelines to whose main concern is expenditure policy formulation. While
examining the shorter period
i.e. periods after the two world wars and independence of the country) he sees the rele
vanceand validity in the concept of displacement effect propounded by Wiseman and
Peacock. His study of the growth of public expenditure in India over roughly a
century, is a modest attempt and the line of the pioneering study “Growth of Public
Expenditure in the UK” done by Wiseman and Peacock.

8. Zahir, (1972) in the study, “Public Expenditure and Income Distribution of India”, has
examined the role of Public Expenditure in the field of income distribution during
the period 1951-52 to 1965-66. He concluded that the growing Public Expenditure in I
ndia has made by insignificant –  contribution towards the achievement of social
justice which is a very important objective of Public policy in our country.
 9. Nanjundappa, (1972) in his study, “State Governments Expenditure”, has examined
both current and capital Expenditure of States for the year 1960-61. He has made
inter-State comparisons and also brought out the functional and economic
classification of the State Expenditure.

10. Thimmaiah (1977) in his study, “Growth of public expenditure in Karnataka”, has
studied the growth pattern of Public expenditure in Karnataka and has taken 21
years period from 1957-1958 to 1977-1978. He has aimed at testing a few theoretical
hypotheses in the context of public expenditures of particular state of the Indian
union. He concludes that the growth pattern of public Expenditure in Karnataka is not
linear. Besides, he categories various items of the Public Expenditure of the State
under relevant heads.

11. Shanmugam, (1977) in his study, “Public Expenditure of the Government of

Tamil Nadu from 1965-66 to 1974-75” has presented the facts on the trends of Tamil
Nadu Governments Welfare expenditure. The study covered a period of ten years
from 1965-66to 1974-75.

1.3 Objective Of Study

1. To know about union budget in India.

2. To analyse and evaluate the inflow and outflow of resources in budget for 5 years (2018-
2022).
3. To know the role of budget in economic growth and development of India

1.4 Scope Of The Study

1. Conceptual scope
Conceptual scope for confirmed to study analytically India’s budget.
2. Geographical scope
Geographical scope is limited to India
3. Chronological scope
Chronological scope is valid for 5 years (2018-2022).
4. Analytical Scope
Analytical scope is limited to use some statistical techniques like Average,
Tabulations, Graphs, Charts.

1.5 Importance Of Study

1.Government budgeting is important because it enables the government to plan and
manage its financial resources to support the implementation of various programs and
projects that best promote the development of the country.
2.Through the budget, the government can prioritize and put into action its plants,
programs and policies within the constraints of its financial capability as dictated by
economic conditions.
3. It helps control our spending, track our expenses and save more money.
 4. budgeting can help you make better financial decisions, prepare for emergencies, get
out of debt, and stay focused on your long-term financial goals.
5.  budget is that it becomes a reference document and thus helps in planning the
activities of the organization or individual.
1.6 Research Methodology
1. Websites
2. Books
3. Journals
4. Articles
5. Government Publications

Chapter-2
THEROTOCAL BACKGROUND
2.1 BASIC CONCEPTS-
According to Article 112, the government has to present its accounting and
income expenditure details to the Parliament every financial year. This annual financial
statement as defined in the Constitution is called India's budget. India's annual financial year
from April 1 to March 31. Whereas earlier it was from 1 May to 31 April. The LK Jha
Committee presented its report on the change in the financial year. Preparation of the budget
start from October to November. There are three things in the budget-

1. Interim figures for last year

2. Revised figures for the current financial year
3. Proposed figures for next financial year

The preparation of the budget includes the Finance Minister, Finance Secretary,
Revenue Secretary and Chief Economic Advisor of the government, etc. According to Article
365, no tax can be levied without any law, and according to Article 266, without the
permission of Parliament Expenditure will not be spent. The President puts the budget in the
Lok Sabha on the last working day of February. The budget presented in Lok Sabha by the
Finance Minister of the Central Government. This must be passed by both houses of
Parliament before the budget is implemented.
2.2 CHARACTERISTICS
1. It is a statement of estimates of government receipts and expenditure.
2. Indian budget is prepared annually.

3. In India, the Finance Minister presents the annual budget of the Government for its
approval by the parliament. It is approved and then it is implemented.
4. The expected revenues and expenditures are planned as per the objectives of the
Government.
5. A budget discloses both the financial performance of the Government in the last year and
Government policies for the following year.
6. Budget impacts the economy through fiscal discipline and resource allocation
2.3 SCOPE
1. The Indian Budget gives the complete picture of the estimated receipts and expenditures of
the Government of India for that year.
2. It is wipe out poverty and create more job opportunities. This will ensure that every citizen
of the country is able to meet his/her basic needs of food, shelter and clothing along with
facilities for health care and education.
3. Indian budget focused on ‘Digital and technology’ and sectors like infrastructure, heath,
education and provision of e-services to the masses.
2.4 TYPES OF INDIAN BUDGET
There are three types of government budgets in India.
 1. Surplus Budget:
When government receipts are more than government expenditure in the budget,
the budget is called a surplus budget. In other words, a surplus budget implies a situation
where in government revenue is in excess of government expenditure. A surplus budget
shows that government is taking away more money than what it is pumping in the
economic system. As a result, aggregate demand tends to fall which helps in reducing the
price level. Therefore, in times of severe inflation, which arises due to excess demand, a
surplus budget is the appropriate budget. But in situation of deflation and recession,
surplus budget should be avoided. Mind, balanced budget and surplus budget are rarely
used by the government in modern-day world.
2. Deficit Budget:
When government estimated expenditure exceeds government receipts in the
budget, the budget is said to be a deficit budget. In other words, in a deficit budget,
government estimated revenue is less than estimated expenditure. These days’ popular
democratic governments adopt mostly deficit budget to meet the growing needs of the
people. It may be mentioned that Keynes had advocated a deficit budget to remedy the
situation of unemployment and under-employment. Government covers the gap either
through borrowing or through withdrawals from its reserves. Thus, a deficit budget
implies increase in government liability and fall in its reserves. When an economy is in
under-employment equilibrium due to deficient demand, a deficit budget is a good
remedy to combat recession.
3. Balanced Budget:
A government budget is said to be a balanced budget in which government
estimated receipts (revenue and capital) are equal to government estimated expenditure.
Let us suppose for the sake of convenience that the only source of revenue is a lump sum
tax. A balanced budget will then imply that the amount of tax is equal to the amount of
expenditure.
Two main merits of a balanced budget are:
(a) It ensures financial stability and (b) It avoids wasteful expenditure.
Two main demerits are:
(i) Process of economic growth is hindered and (ii) Scope of undertaking welfare
activities is restricted.
2.5 Advantages and Disadvantages:
1. Advantages of Indian Budget:
1. A budget provides a structured plan leading to better decision making and goal
achievements.
2. The seniors of an organization are responsible to frame a budget plan resulting in effective
handling of expenses.
3. A good plan can help in the more judicious use of resources as well as control over
financial expenses.
4. The budget reflects the coordination between the employees of an organization as it takes
them towards the same end.
5. A budget assists the business schemes throughout with the best utilization of the available
resources.
2.Disadvantages of Indian budget
1. A budget is a more time-consuming and inaccurate format for estimating a summation of
expenditures and revenues.
2. A budget plan is not open to the opinions of all the employees which may turn out to be
demotivating for them sometimes
3. There is a constant change taking place in the industry or market. Hence the framed plan
may not be as worthy as it may appear in the beginning.
4. The target achieved by one department of a company might be found difficult to be
achieved by the other departments.
5. Sometimes the budgeting might be very costly than the actual business plan which may or
may not be affordable by all types of companies.

2.6 Functions:
1. Ensure efficient allocation of resources.

2. Reduce unemployment and poverty level.

3. Reduce wealth and income disparities.

4. Keep a check on prices.

5. Change tax structure.